Why It’s so Difficult to Launder Money on the Blockchain

Written by Andre Kalinowski, founder at blockchain monitoring platform PARSIQ


There is still a common misconception about cryptocurrencies amongst the public. They often regard it as a method for shady deals and illegitimate companies. This stems partially from the fact that one of the first real-world use cases of Bitcoin was its use for payments on the infamous dark web marketplace Silk Road, where anonymous users could buy almost any banned product, ranging from illegal drugs to weapons. Moreover, the authors of ransomware have also hidden behind Bitcoin’s anonymity in the past.

However, while the early days of Bitcoin may have been littered with unscrupulous transactions, modern advances in blockchain analysis mean that it is far more difficult to launder money on the blockchain than many realise. Most cryptocurrencies are far less anonymous than people expect, and transaction history is a lot more traceable than fiat currencies.

With this in mind, we will explore the reasons for why it’s so difficult to actually launder money on the blockchain and debunk the myth that crypto is a good place to carry out shady exchanges.

Less Anonymous Than You Think

In essence, most blockchains are transparent public ledgers. This means that every transaction made can be read by anyone and remains on the ledger forever, with records of the accounts and the inputs and outputs involved in each transaction, so transaction history can be followed back to gain significant knowledge over an individual’s financial affairs.

Another important factor to consider is that while cryptocurrencies were created to be pseudonymous, this anonymity is lost as soon as cryptocurrencies are moved out of the system. Even though crypto wallets comprise a series of letters and numbers that do not provide any information on the account holder, as soon as someone purchases something in crypto using that wallet as an account, or…

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